Southeast Rebound

2 min read

and all properties that could be converted [from condos into rentals] were,” says Horner. “When we come out of this cycle and there are no new projects, the properties that went to a rental strategy are ideal to be converted [back] to condos,” he predicts.   In terms of Atlanta’s condo market, Horner says that the […]

and all properties that could be converted [from condos into rentals] were,” says Horner. “When we come out of this cycle and there are no new projects, the properties that went to a rental strategy are ideal to be converted [back] to condos,” he predicts.   In terms of Atlanta’s condo market, Horner says that the MSA has “a nice inventory of product geared to the first-time homebuyer,” which is also particularly advantageous, as they do not have another home to sell and can take advantage of price reductions and historically low rates.As far as Miami goes, Olds admits there is not much to be positive about in the near-term—by early 2011, peak-to-trough vacancies will have climbed 660 basis points, topping out at over 9 percent, and the metro’s recovery is anticipated to be meager at best—but its ties to Latin America can help with the demand, as visitors and foreign businesses may become a bright spot for the city. Furthermore, she notes, “investors are buying a bulk number of units in some of these struggling condo towers to rent out,” which, she says, is a long-term plan for investors who have the ability to wait and sell when the market eventually turns around. She adds that this currently makes up the bulk of transaction volume—and increases the shadow market supply—which she predicts will continue for the next 18 months.    PPR estimates that yields will rise by 150 basis points from 2008 to 2011, which, coupled with a strong rent and NOI rebound, will produce some attractive returns. But investors should avoid the condo-heavy submarkets. “Prices are declining and values are declining, and during the condo conversion boom, cap rates compressed significantly and price-per-unit went up significantly,” notes Olds. “We saw a huge run-up in values, which priced buyers out of the market. Now that is correcting and buyers will be looking for discounted assets.”

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